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  • Writer's pictureKirk Hartley

Binding a Successor Corporation to a Forum Selection Clause in International Litigation Related to a

With a hat tip to Mondaq, this article from Proskauer summarizes a recent 2d Circuit ruling holding that forum selection clauses may be enforced against successor entities in the context of an entity 90% owned by the Argentine government. The case arises in the context of business to business litigation, but the same principles presumably will apply to consumer claims where a contract terms is interposed as a substantive defense or as controlling forum. That may be a mixed blessing for corporations as choosing one forum or law may actually foster class action claims because it will simplify otherwise extant issues regarding choice of law and/or forum.

The article’s key excerpt explains the following:

“On October 23, 2009, the Second Circuit definitively ruled in Aguas Lenders Recovery Group LLC v. Suez, S.A (ALRG) that U.S. forum selection clauses are enforceable against successors in interest under ordinary principles of contract law – even when the successor is a non-U.S. entity. The opinion ( found here) clarifies this key legal issue, further strengthening predictability in international transactions. Applying ordinary successorship law to forum selection clauses prevents a defaulting successor from escaping liability on a jurisdictional theory when substance and jurisdiction were negotiated as one contractual package.

In ALRG, Proskauer represents the Plaintiff-Appellant in claims against an Argentine entity, AySA. ALRG sued AySA to recover on more than $125 million in loans made to Aguas Argentinas – a now-defunct Argentine entity that ran Buenos Aires‘ water and sewage system. ALRG alleges that AySA is Aguas‘ successor in interest. Among other things, ALRG alleges that AySA (owned 90% by the Argentine government) was specifically created to, and did, take over Aguas‘ contracts and operations after Aguas‘ shareholders opted to get out of their arrangement with Argentina and that, as part of that takeover, AySA received the physical assets that had been built, improved or acquired using money borrowed by Aguas, the accounts receivable, and assumed various of Aguas‘ employment and other contracts – yet shirked its obligations under Aguas‘ loan agreements (which were expressly binding on all successors). Proskauer filed claims against AySA (and others) in the Southern District of New York based, in part, on express forum selection clauses in the operative agreements.”

#GlobalTortChoiceofLawVenueIssues #Sovereigns

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